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HENNA PITHIA
Media amplification renews interest in Professor Ed McCaffery’s phrase and tax website
Ed McCaffery By Matthew Kredell More than two decades ago, Professor Ed McCaffery came up with a phrase to explain how the rich use the American tax system to their advantage: “Buy, borrow, die.” After being dismissed by academics and tax professionals who felt it was overly simplistic, the phrase caught on in 2021, cycling through the news media and re-energizing McCaffery’s efforts to gain attention for tax inequality.
In June, ProPublica cited McCaffery’s work in an article using newly-obtained IRS data demonstrating how the rich pay far less in income taxes than working class Americans. Coverage followed in The New York Times and Wall Street Journal, and “Buy, borrow, die” resonated on social media.
“To me, it’s hugely exciting to see something take off that I’ve been working on for so long and met some resistance from the establishment,” McCaffery says. “But I think the bigger story is that people are raising alarms about inequality and about the rich getting richer.”
ORIGIN OF “BUY, BORROW, DIE”
McCaffery came up with “Buy, borrow, die” in the mid1990s to help students understand how the wealthy avoid paying taxes.
“The public thinks the rich get away with paying no taxes because they have expensive lawyers and accountants that regular people can’t get who are working their magic,” McCaffery said. “That’s not the case. The rich aren’t paying taxes because of perfectly legal reasons.” Here’s how: Buy: An asset that will increase in value without producing income. Borrow: Money to live off based on this appreciating asset. Die: Avoid the 20% capital gains tax for selling an asset by holding the asset until death, when the asset can be sold off tax free by children or spouses.
Assets that aren’t sold or producing cash aren’t taxed no matter how much they increase in value. Borrowed money also isn’t taxed, and the interest rate is typically much less than the income tax rate.
McCaffery first wrote about the phenomenon in his 2002 book “Fair Not Flat: How to Make the Tax System Better and Simpler,” (University of Chicago Press) in which he argued for replacing the American income tax system with a progressive spending tax.
CREATING THE PEOPLE’S TAX PAGE
During the 2016 Presidential election, with the uproar over Trump’s taxes, McCaffery created the People’s Tax Page to explain the issue. On the theory that videos can reach a wider audience, he invited USC Gould student Michael Greenwade (JD 2019) and recent USC School of Cinematic Arts graduate Maddie Rodriguez to help. USC Gould students Vivian Liu and Rae Williams currently work on the People’s Tax Page.
Greenwade, now a tax attorney in Beverly Hills, got his sons involved in some of the videos demonstrating how “Buy, borrow, die” works.
